Maceda Law and Recto Law

MACEDA LAW: REALTY INSTALLMENT BUYER ACT
What is the Realty Installment Buyer Act?
Commonly known as the “Maceda Law.” It is embodied in R.A. 6552 which provides for certain protection to
particular buyers of real estate payable on installments. The law declares as "public policy to protect buyers
of real estate on installment payments against onerous and oppressive conditions.
Note: The purpose of the law is to protect buyers in installment against oppressive conditions.
What are the transactions/sale covered by the Maceda Law?
The law involves the sale of immovables on installment (Maceda Law, R.A. 6552).
1. Coverage: Residential Real Estate (Villanueva, p. 431)
2. Exclude:
a. Industrial lots
b. Commercial buildings (and commercial lots by implication)
c. Sale to tenants under agrarian laws
What are the rights granted to buyers?
1. Buyer paid at least 2 years installment
a. Pay without interest the balance within grace period of 1 month for every year of installment payment.
Grace period to be exercised once every 5 years.
b. When no payment – cancelled; buyer entitled to 50% of what he has paid + 5% for every year but not
exceeding 90% of payments made
Note: Cancellation to be effected 30 days from notice & upon payment of cash surrender value.
2. Buyer paid less than 2 years installment
a. Grace period is not less than 60 days from due date
b. Cancellation if failure to pay w/in 60 days grace
c. 30 days notice before final cancellation

Note: buyer can still pay w/in the 30 days period with interest.
Recto Law
Buyers of personal property are further protected by the Recto Law. Initially known as the Installment Sales
Law, it is now included under a set of provisions under the Civil Code of the Philippines.
Consumer rights are protected under Philippine laws, and real estate is no different. A property purchase
involves a lot of money, so a buyer needs to know the laws that protect them. If you are purchasing your
first home, you will need to familiarize yourself with the Recto Law, its purpose, and the sanctions given to
people who violate it.
Q: What is the Recto Law?
A: People who purchase personal property, as opposed to real property, on installment are protected by the
Recto Law. Authored in 1933 by the “Great Academician,” Senator Claro M. Recto, the statute was called
Act No. 4122, otherwise known as the Installment Sales Law. Its main purpose is to prevent potential
abuses by the seller in the event that the buyer is unable to make further installments for a property.
It was passed by the Philippine Legislature on December 9, 1933. The law amended a certain portion of the
Civil Code of 1889 (Código Civil) through the insertion of Section 1454-A.
The Civil Code of 1889 itself was repealed by Republic Act No. 386 which took effect in 1950. It became
known as the Civil Code of the Philippines. This expanded Section 1454-A into what are now Articles 1484
to 1486 of the Civil Code. These are the provisions that currently contain the precepts of the Recto Law.
Although primarily for buyers of personal property in installments, it was used in a particular case involving
a contract of lease even without a clear option to buy. The agreement was not actually to lease the
personal property but to acquire it upon the fulfillment of the purported contract.
How is it different from the Maceda Law?
The main contrast between the two statutes lies in its application. Articles 1484 to 1486 of the Civil Code
govern sales on installment of personal property. On the other hand, the Maceda Law or Republic Act No.
6552 applies to purchasers of real property on an installment basis. The latter is also known as the Realty
Installment Buyer Act and contemplates residential properties in particular.
The Maceda Law requires certain requisites before a purchaser of real property can benefit from its
provisions. Those who have paid less than two years’ worth of installments only have a sixty-day grace
period to satisfy an installment that has become due. Failure to pay allows the seller to send the buyer a
notice to rescind the contract, which may be cancelled after thirty days from its receipt. A buyer who has
paid more than two years’ worth of installments can have a grace period of one month for every year paid,
provided that this is exercised only once every five years. If cancelled, the purchaser may recover 50% of
the payments made with an additional 5% for every year after five years.
The Recto Law, on the other hand, gives the latter three alternatives instead of cumulative choices to
terminate a contract:
Demand payment
Cancel the sale
Foreclose the mortgage
Note that the buyer must be in default by two or more installments before any of the remedies may be
exercised.
To whom does the Recto Law apply?
It applies to both the buyer and the seller. In some cases, the parties can also be regarded as the lessor
and lessee. It can also govern certain transactions entered into by a mortgagor and mortgagee of personal
properties.
The buyer (or lessee or mortgagor) can select from the three alternatives as well, insofar as they are
applicable. This law will also govern leases with an option to purchase, such as in the aforementioned
case. However, the Recto Law does not cover straight sales wherein a down payment is given and the
remaining balance is agreed to be fulfilled through a single payment.
Even if the Recto Law was authored to prevent abuses by mortgagees (lenders), it is quite possible that a
mortgagor in default may increase his liability. This happens when the mortgagor fails to pay two or more
installments and refuses to return the personal property upon the seller’s demand. Should there be an
action for replevin to recover such property and the court rules in favor of the seller, the buyer might have to
pay costs and attorney’s fees as well.
The seller could likely be penalized in similar fashion should the Recto Law be violated. One remedy would
prevent the seller from exercising the others. For instance, if the buyer has already returned the personal
property to the seller, the seller can no longer try to collect the remaining installments. This would be
viewed as an unnecessary legal proceeding should the seller pursue more than one remedy in court. It
would cause the buyer to make additional needless expenses which will likely be paid for by an erring
seller.
Although a great deal of effort and research was put into the creation of this article, Lamudi Philippines
always advises home buyers and future property owners to consult with professionals, such as licensed
real estate brokers and attorneys, to ensure their real estate transactions are properly and promptly
processed.

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MACEDA LAW: REALTY INSTALLMENT BUYER ACT

What is the Realty Installment Buyer Act?

What are the transactions/sale covered by the Maceda Law?

1. Coverage: Residential Real Estate (Villanueva, p. 431)

b. Commercial buildings (and commercial lots by implication)

c. Sale to tenants under agrarian laws

What are the rights granted to buyers?

1. Buyer paid at least 2 years installment

2. Buyer paid less than 2 years installment

a. Grace period is not less than 60 days from due date

b. Cancellation if failure to pay w/in 60 days grace

c. 30 days notice before final cancellation

Q: What is the Recto Law?

How is it different from the Maceda Law?

Cancel the sale

Foreclose the mortgage

To whom does the Recto Law apply?

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